Kotler Chapters Summary

Marketing Management Chapter 1 Understanding Marketing Management Social Definition of Marketing Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and ser vices of value with others. Marketing is an essential art and science that is engaged in a vast number of ac tivities by both persons and organizations. It has become an increasingly vital ingredient in the success of a business. Good marketing is the result of careful planning and execution. There are two sides to marketing – the formulated side an d the creative side. It is important to lay the foundation in marketing concepts , tools, frameworks and issues of the formulated side while at the same time ins til the real creativity and passion for marketing, as we shall come to see in th is chapter. Marketing is increasingly becoming an important function in all organizations to ensure that demand for a product or service persists along with customer retent ion. Scope of Marketing A good marketer must be able to answer the following questions: What is Marketing? The formal definition of marketing is, Marketing is an organizational function a nd a set of processes for creating, communicating and delivering value to custom ers and for managing customer relationship in ways that benefit the organization and its stakeholders. What is Marketed? Some of the common entities that are marketed are goods, services, events, exper iences, persons, places, properties, organizations, information and ideas. The five key functions of a marketing manager or CMO are: • Strengthening the brand • Measuring marketing effectiveness • Driving new product de velopment based on customer needs • Gathering meaningful customer insights • Utilizi ng new marketing technology Who Markets? A marketer is someone who seeks a response, attention, purchase, vote, donation etc from another party called the prospect. Marketing managers are responsible f or demand management. Eight demand states are possible: - Negative demand - Nonexistent demand - Latent demand - Declining demand - Irregular demand - Full demand - Overfull demand - Unwholesome demand The key customer markets are consumer markets, business markets, global markets, non-profit and governmental markets. Core Marketing Concepts: - Needs - state of felt deprivation for basic items such as food and clothing an

d complex needs such as for belonging. i.e. I am hungry. - Wants - form that a human need takes as shaped by culture and individual perso nality i.e. I want a hamburger, French fries, and a soft drink. - Demands - human wants backed by buying power. i.e. I have money to buy this me al. - Target Markets are the market segments identified by the marketer which presen t the greatest opportunity. - Value Proposition is a set of benefits that companies offer to customers to sa tisfy their needs. The intangible value proposition is made physical by as offer ing. A brand is an offering from a known source. - Value reflects the sum of the perceived tangible intangible benefits and costs to customers. Satisfaction reflects a person’s judgements of a product’s perceived performance. - To reach a target market a marketer uses different marketing channels like com munication channels, distribution channels and service channels. - Supply chain is a longer channel stretching from raw materials to components t o final products that are carried to final buyers. New Marketing Realities: Some of the major societal forces that marketers have to deal with today are net work information technology, globalization, deregulation, privatization, heighte ned competition, industry convergence, consumer resistance, retail transformatio n and disintermediation. Company orientation towards Marketplaces: The major marketing philosophies are: - The Production Concept o Consumers favor products that are available and highly affordable. o Improve production and distribution. - Product Concept o Consumers favor products that offer the most quality, performance, and innovat ive features. - Selling Concept o Consumers will buy products only if the company promotes/ sells these products . - Marketing Concept o focuses on needs/ wants of target markets & delivering satisfaction better tha n competitors. - Societal Marketing Concept o Focuses on needs/ wants of target markets & delivering superior value. - Holistic Marketing Concept o Based on the development, design and implementation of marketing programs, pro cesses and activities that recognize their breadth and interdependencies. - Relationship Marketing o Aims to build mutually satisfying long-term relationships with key constituent s in order to earn and retain their business. Marketing Management Tasks: The following are the most important marketing management tasks: - Developing Marketing Strategies and Plans - Capturing Marketing Insights - Connecting with Customers - Building Strong Brands - Shaping the Marketing Offerings - Delivering Value - Communicating Value - Creating Long-Term Growth

Chapter 2 Developing Marketing Strategies And Plans Supply Chain Many companies today outsource less critical resources if they can obtain better quality or lower cost. Also, many companies partner with specific suppliers and distributors to create a superior value delivery network, also known as Supply Chain. In this chapter, mainly the following points have been discussed - How does marketing affect customer value? - How is strategic planning carried out at different levels of the organization? - What does a marketing plan include? Developing the right marketing strategy over time, through discipline and a crea tive thought process can go a long way in the marketing management process. Firm s must constantly strive to improve every aspect of their strategy and the plans to guide the marketing process. The Value Delivery Process In the new view of business processes, marketing is viewed at the beginning of t he planning stage. A smart competitor must design and deliver products for welldefined micro-markets and cater to their specific wants, perceptions and prefere nces. The Value Creation and Delivery Sequence can be divided into two segments of marketing: Strategic Marketing and Tactical Marketing. Core Competencies Core Competency refers to areas of special technical and production expertise, w hereas distinctive capability describes excellence in broader business processes . Market-driven organizations generally excel in three distinctive capabilities: market sensing, customer linking and channel bonding.

Holistic Marketing Holistic marketing orientation means, integrating the value exploration, value c reation and value delivery activities with the purpose of building long-term, mu tually satisfying relationships and co-prosperity among key stakeholders. It hel ps manage a superior value chain that delivers a high level of product quality, service and speed, in addition to expanding customer share, building customer lo yalty and capturing customer lifetime value. A s -

firm must coordinate all the department activities to conduct its core busines processes, through cross-functional teams Market-sensing process New-offering realization process Customer Acquisition process Customer Relationship Management Process Fulfillment Management Process

Value Chain The value chain is a tool which is used for identifying ways to create more cust omer value. There are 9 strategically relevant activities – 5 primary and 4 suppor t. Strategic Planning Companies need to focus on the customer and organize to respond effectively to t heir changing needs, to be known as master marketers. The marketing plan is the

central instrument for directing and coordinating the marketing effort. The mark eting plan operates at two levels: strategic and tactical. • The strategic marketing plan lays out the target markets and the value proposit ion the firm will offer, based on an analysis of the best market opportunities. • The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels and service. Corporate Headquarters All corporate headquarters undertake four planning activities - Defining the corporate mission - Establishing strategic business units - Assigning resources to each Strategic Business Unit - Assessing growth opportunities Innovation in marketing is critical. Senior management should identify and encou rage fresh ideas from a youth perspective, from people new to the field and orga nization, to gain an understanding and a new approach to marketing. Strategic Business Unit A Strategic Business Unit is a single business (or a collection of similar busin esses) that can be planned separately from the rest of the company. By identifyi ng the company’s SBUs, it is easy to develop separate strategies and assign approp riate funding. Mission Statement The best Mission Statement reflects a vision, an almost impossible dream that pr ovides a direction for the company for the next 10 or 20 years. A good mission s tatement focuses on limited number of goals, links the company’s policies and valu es and gives a long term view. It is as short, relevant and meaningful as possib le. Business Unit Strategic Planning The Business Unit Strategic Planning process consists of the following steps 1. The Business Mission: Each business unit needs to define its specific mission within the broad er company mission. 2. SWOT Analysis: The overall analysis of a company’s Strengths, Weaknesses, opportunities and Threa ts is called SWOT analysis. It is a way of monitoring the external and internal marketing environment. To evaluate opportunities, companies can use Market Oppor tunity Analysis. 3. Goal Formulation: Developing specific goals for a short term is known as Goal Formulation. They ar e specific with respect to magnitude and time. Goals must be consistent and real istic and could be a mix of various objectives. 4. Strategy Formulation: Strategy is a game plan for achieving the goals. It consists of a Marketing Stra tegy, Technology Strategy and a Sourcing Strategy. 5. Program Formulation: The unit must plan programs in accordance with its goals and strategy and thus work upon the various departments, to strengthen them and integra te all of them together. 6. Implementation: Even a great marketing strategy can be sabotaged by a poor implemen tation. It must coordinate its tasks to implement its plan properly. These tasks must be in line with the interests of the stakeholders as well. 7. Feedback and Control: The key to organizational health is willingness to examine the changing environment and adopt new goals and behaviors. In the rapidly changing market

environment, even large organizations which anged through strong leadership.

are subject to inertia can be ch

Chapter 3 Capturing Marketing insights and Spotting Market Trends MIS (Marketing Information System) Consists of people, equipment and procedures, to gather, sort, analyze, evaluate and distribute needed, timely and accurate information to marketers. To provide insight into an inspiration for marketing decision making, companies must possess comprehensive, up-to-date information about macro trends as well as micro trends particular to their business. This chapter deals with various mode s of obtaining this information and also looks into the major macroeconomic forc es that affect marketing decisions. MIS (Marketing Information System) MIS can provide data e.g. Swiss eat most chocolates, Greeks eat most cheese. It relies on internal company records, marketing intelligence activities and Market Research. MIS provides information on market happenings and changes in environm ent. Purposes of MIS have been noted below. - Train the sales force for intelligence gathering by observing competitors acti vities and listening to customer comments. - Motivate retailers and distributors to pass intelligence. E.g. mystery shopper s to identify customer treatment and possible flaws. - Network externally using competitor’s annual reports, talking with their retaile rs, distributors and employees, attending shareholder meetings. It should be don e ethically and legally. - Use government sources (Census, NSSO reports) or purchase data from outside su ppliers (AC-Nielsen, etc) - Create a panel of largest, sophisticated and important customers for feedback. - Use online forums, sites offering customer and expert reviews, Customer compli ant sites, Internal Company Records - Order to Payment cycle - Customer places order for goods -> Sales team sends invoice to various depart ments -> Sales team back orders out of stock items -> Suppliers send goods and s ales team pays suppliers -> Sales team delivers order and receives payment. Purp ose is to minimize number and duration of cycles. - Sales Information System - Keeping constant track of sales, customers, etc. It can help in identifying t rends. - Database / Data warehousing / Data Mining - Separate databases are there for products, salespersons and customers. Purpose is to analyze (mine) data using statistical methods and discover trends. Analyzing the Macro Environment Fad – Unpredictable, short-lived, without any economic or social significance Trend Sequence of events that have momentum and durability, reveals the future. Megatrend – Large social and economic influence, slow in formation but has lasting effect. What is the difference between a Fad and a Trend? A fad becomes a trend when it affects a large number of people, has functional v alue, has lesser number of substitutes, and has other trends promoting it. Major Macro Environmental Forces

Demographic 16.7% of World population in India; Male to Female ratio of 933:1000 Population Age mix : median age of 23.8 years, 34% b/w 12 and 25yrs, 24% b/w 25 and 34 year s Literacy level: 65.38% literate, 75.8% males and 54.16% females, 76% literacy be tween 15-24yrs age group, 64.5% literacy between 25-34yrs age group. Economic Purchasing Power depends on income, savings, prices, credit availability. India’s GDP is $1.2 trillion, per capital income of $3100 Income distribution: 77.7% of urban households have income up to Rs3000/month while only 2.1% have in come more than Rs 10,000/month. Categories of Indian consumers: Destitute ( less than Rs16,000 annually, inactiv e participants in market exchange), Aspirants ( Rs 16,000 to Rs22,000, new entra nts in consumption system), Climbers, (Rs 22,000 to Rs 45,000, have desire and w illingness to buy but has limited cash), Consuming Class ( Rs 45, 000 to Rs 2,15 ,000, majority have money and are willing to pay), Rich ( more than Rs 2,15 000, have money and own a variety of products). Trend shows increasing % of Consumers and Climbers while a decreasing % of Desti tute and Aspirants. Social-Cultural Society shapes beliefs, values, demands, and requirements. It affects dress code s, food habits, brand preferences. Trend shows an increasing role of children on purchasing decisions e.g. bicycles, computers, wrist watches, shoes and other F MCG goods. Natural Deterioration of environment is a significant concern e.g. Greenhouse Effect, Oz one layer and fossil fuel depletion. Government concerns in this aspect are Euro -2 emissions norms and CNG. Although majority feels necessity of environmental f riendly products, they do not buy because (a) Perception of green good being of inferior quality and (b) Perception that good does not contribute majorly to the environment. Corporate Environmentalism is recognizing the importance of enviro nmental issues affecting the firm and integrating those in its strategic plans is fast gaining ground. E.g. Focus on Non-renewable sources like Jatropha oil, Pollution Control Systems like landfills, recycling centers and focus on CNG initiatives. Technological Four major trends are (a) Accelerated Pace of Change: e.g. Apple selling 23.5 mi llion in 2006 (b) Unlimited Opportunities for Innovation e.g. Developments in Bi o-tech, telecommunication, Robotics, aid vaccines, contraceptive pills. (c) Vary ing R & D Budget: e.g. Increasing R & D in Pharmaceutical companies like Cipla, Dr. Reddy’s, and Ranbaxy (d) Increasing regulation of technological change e.g. Dr ugs and cosmetic act, control on clinical trial, standard for drugs. Political and Legal Two major trends are (a) Increase in business legislation: to protect companies from unfair competition, to protect consumers from unfair business practices, to protect society from unbridled business behavior and to charge businesses with social costs created by their products or processes (b) Growth of special intere st groups and improvements like the Consumer Protection Act.

Chapter 4 Conducting Marketing Research and Forecasting Demand

Why Marketing Research? Successful Marketing Managers need timely, accurate and actionable information a bout consumers, competition and their brands to assess past performance, plan fu ture activities and take strategic decisions leading to successful product launc h or increase growth of a brand. What is Marketing Research? Systematic Design, collection, analysis and reporting of data and findings relev ant to a specific marketing situation facing the company. Secondary Data: Already existing somewhere which was collected for some other purpose Primary Data: Freshly gathered data for research only. Expensive to collect. What are the major steps of Marketing Research Process? Step 1 : Define the problem, the decision alternative and the research objective Step 2 : Develop the research plan Step 3 : Collect the information Step 4 : Analyze the information Step 5 : Present the findings Step 6 : Make the decision Step 1: Achieve clarity on the content, the scope of market research and what al l decisions are to be made on the basis of research. Step 2: Primary Data c can be collected through following: Research Methods •Observational Observational Research: Observing consumers, informal interviews, u sing tools from anthropology to provide deeper understanding of consumers. •Focus Focus Group Research: A meeting of a group of people who represent potentia l customers or important actors for research discussing issues relevant to resea rch •Survey Survey Research: Companies undertake descriptive research to learn about p eople’s beliefs, preferences and satisfaction. •Behavioral Behavioral Data: Customer’s actual purchases do not match their statemen ts made in surveys always hence certain techniques help in exposing these discre pancies •Experimental Experimental Research: This captures cause and effect relationship i n observed findings. Research Tools •Questionnaires: Questionnaires: A set of questions soliciting responses that is o f relevance to market situation. They can be either open-ended ended or closed-e nded. closed •Qualitative Qualitative Measures: Relatively unstructured measurement approach fo r exploring consumer’s responses •Technological Technological Devices: devices like skin sensors brain wave scanner s to capture consumer’s response.

•Sampling Sampling Plan: A plan addressing questions like whom all to survey, how many people to survey, how should we select people for survey. •Contact Contact Methods: Mail Questionnaire, Telephone Interview, Personal Interv iew, Online Interview. Step 3: Data collection is one of the most expensive, time time-taking taking an d most error prone phase of market research as it entirely depends on availabili ty, honesty and consistency of respondents. However technology has eased the pro blem to a great extent. Step 4: This is the process to extract findings by tabulating the data and devel oping in hope of discovering additional findings. Step 5: The researcher presents finding relevant to the major marketing decision s facing management management. Step 6: Market research is just a tool to provide insight to the managers. Depen ding on their confidence in the findings, managers decide to use it Types of Market Potential market Set of consumers who profess a sufficient level of interest in a market offer. Available market Set of consumers who have interest income and access to a particular offer. Target market The part of the qualified available market the company decides to pursue. Penetrated market Set of consumers who are buying the company s product.

Barriers to Marketing Research - Narrow approach to Marketing Research - Uneven Caliber of researchers - Poor framing of problem - Late and occasionally erroneous findings - Personality & presentational differences Measuring Marketing Productivity To assess the efficiency and effectiveness of marketing of marketing activities there are - Marketing metrics to assess marketing effects - Marketing mix modeling to estimate casual relationships and measure how market ing activity affect outcomes - Marketing Dashboard are a structured way to disseminate the insights gleaned f rom these two approaches within the organizations Types of Demand Market Demand • It is the total volume that would be bought by a defined customer group in a def ined geographical area in a defined time period in a defined marketing environme nt under a defined marketing program Company Demand

• It is the company’s estimated share of the market demand at alternative levels of company marketing effort in a given time period Current Demand • It is the demand that companies attempt to determine by measuring total market p otential, area market potential industry sales and market share Future Demand • It is the demand that companies determine by surveying buyer’s intentions, solicit their sales force’s input, gather expert opinions, analze past sales or engage in market testing mathematical models, advanced statistical techniques and compute rized data collection procedures To estimate current demand companies attempt to determine total market potential , area market potential industry sales and market share To estimate future demand companies’ survey buyer’s intentions solicit their sales f orce’s input, gather expert opinions, analyze past sales or engage in market testi ng mathematical models, advanced statistical techniques and computerized data co llection procedures are essential to all types of demand and sales forecasting. Chapter 5 Creating Customer Value, Satisfaction and Loyalty In the face of increasing competition, companies today face their toughest test of survival. Moving from a product-to-sales philosophy to a holistic marketing p hilosophy, however, may provide a better chance of outperforming competition. An d at the cornerstone of this philosophy are strong customer relations. Customer Perceived Value: Customer Perceived Value: It is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering, and the perceiv ed alternatives. This chapter discusses the importance and various methods of creating customer v alue and sustaining customer loyalty. As customers have become more informed and educated than ever, organisations have started to adopt business models where t he customer is at the top. Total Customer Benefit It is the perceived monetary value of the bundle of economic, functional, and ps ychological benefits customers expect from a given market offering because of th e products, services, personnel and image involved. Total Customer Cost It is the perceived bundle of costs customers expect to incur in evaluating, obt aining, using, and disposing of the given market offering, including monetary, t ime, energy, and psychological costs. Very often, a customer value analysis is undertaken by managers to better unders tand the company’s strengths and weaknesses in comparison with competition. It fol lows the pattern below 1. Identify the major attributes and benefits that custom ers value. 2. Assess the quantitative importance of the different attributes and benefits. Chapter 5 - Creating Customer Value, Satisfaction and Loyalty Trends 3. Assess the company’s and competitors’ performances on the different customer valu es on each attribute and benefit. 4. Assess how customers in a specific segment rate the company’s performance against a major competitor on an individual attribu te or benefit basis. 5. Monitor customer values over time as the economy, techno

logy, and features change. Total Customer Satisfaction: It is the measure of a customer’s feelings of pleasure or disappointment that resu lts from comparing a product’s perceived performance to their expectations. Satisf action is usually measured with the help of customer surveys. The two major fact ors involved in customer satisfaction are complaint handling and product/service quality. customer. Customer profitability A profitable customer is one that over time yields a revenue stream that is sign ificantly greater than that company’s cost stream for attracting, selling and serv icing that 150-20 Rule The 20% most profitable customers generate as much as 150% of the profits of the company; the 20% least profitable customers lose 100% of the profits. Measuring customer profitability lies in the concept of Customer Lifetime Value (CLV). CL V describes the net present value of the future stream of profits expected over the customer’s lifetime purchases. CLV calculations are generally used by marketer s to develop a long-term perspective. Customer Relationship Management (CRM) It is the process of carefully managing detailed information about individual cu stomers and all occasions where a customer encounters a brand/product to maximis e customer loyalty. CRM can be conducted using the following 4 steps – 1. Identify your prospects and customers. 2. Differentiate customers in terms of their need s and their value to your company. 3. Interact with individual customers to impr ove your knowledge about their needs and to build stronger relationships. 4. Cus tomize products, services, and messages to each customer. The value of the custo mer base can be increased by improved by measures such as reducing the rate of c ustomer defection, increasing the longevity of the customer relationship, making low-profit customers more profitable or terminating them, etc. Chapter 5 - Creating Customer Value, Satisfaction and Loyalty Trends Building Cu stomer Loyalty It involves the following procedures – 1. Interacting with customers 2. Developing loyalty programs 3. Personalising marketing 4. Creating institutional ties Database marketing It is the process of building, maintaining and using customer databases and othe r databases to contact, transact and build customer relationships. Customer Database It contains customers’ past purchases, past volumes, past prices and profits; buye rs’ personal details, status of current contacts, the company’s share of the buyer’s b usiness, competitive suppliers, etc. Datamining Through datamining, marketers can extract information about individuals, trends, etc. from the customer database. It uses techniques such as cluster analysis, p redictive modelling, etc. Disadvantages of Datamining and CRM 1. Building and maintaining a database requires huge amounts of investment in te rms of computer hardware. 2. Convincing employees to be customer oriented than u sing traditional methods. 3. Customer attitudes about privacy of personal data. Probability of error of CRM methods or assumptions made thereof.

Marketing Management A A A Chapter 6 Analyzing Consumer Markets Since marketing starts from the customer, it is of primary importance to underst and the psyche of the customers and their buying motives. This chapter talks abo ut the various behavioural patterns that govern the decision making process of a customer. A marketer needs to understand these factors affecting the customer’s p urchase decisions so as to design an appropriate marketing strategy. Factors affecting Consumer Buying Behaviour 1. Cultural Factors a. Culture - Frames traditions, values, perceptions, prefere nces. E.g. Child learning from family & surroundings. b. Sub-culture - Provides more specific identification and socialization. Include nationalities, religions , racial groups and geographic regions. c. Social Class – Homogeneous and enduring divisions in a society which are hierarchically ordered. Members share similar tastes and behaviour. 2. Social Factors a. Reference Groups – Have direct or indir ect influence on person’s attitude and behaviour. Primary groups: regular interact ion, e.g. family, friends, neighbours. Secondary groups: religious, professional , trade union groups. Aspirational Groups: ones that a person hopes to join. Dis sociative groups: whose values or behaviour and individual rejects. b. Family – Fa mily of orientation: parents and siblings. Acquires orientation towards religion , politics and economics, sense of personal ambition, self worth and love. Famil y of procreation: spouse and children. More direct influence on buying behaviour . c. Roles and Status – Role consists of activities a person is expected to perfor m. Each role carries a status. Marketers must be aware of the status symbol of e ach product. Chapter 6 - Analyzing Consumer Markets 3. Personal Factors a. Age and Stage in the Life Cycle – Tastes are age related. M arkets should also consider critical life events or transitions. b. Occupation a nd Economic Circumstances – Economic Circumstances like spendable income, savings, assets, debts, borrowing power etc affect consumption patterns. c. Personality and Self Concept – Personality, set of distinguishing characteristics that influen ce his/her buying behaviour. Consumers match brand personality with their ideal self concept instead of their actual self concept. d. Lifestyle and Values 4. Ps ychological Factors a. Motivation: Freud’s theory of id, ego and super ego; Maslow’s need hierarchy theory; Herzberg’s two factor model. b. Perception: Process by whi ch we select, organize and interpret information inputs. In marketing, perceptio ns are more important than reality. c. Learning – Induces changes in behaviour ari sing from experience. Marketers can build demand by associating the product with positive drives. d. Memory – Short term and long term memory. Build brand knowled ge and brand recall as node in memory. Problem Recogniton Information Search Evaluation of Alternatives

Purchase Decision Postpurchase Behaviour The Buying Decision Process • • Problem Recognition - Customer recognises a need triggered by internal or extern al stimuli. Marketers need to identify circumstances that trigger needs. Informa tion Search - Two levels of involvement – Heightened attention when person becomes more receptive to information about the product. At next level consumer may ent er into active information search, looking for reading material, phoning friends etc. • • Evaluation of Alternatives - Factors influencing a particular choice over the other include attitudes, beliefs and expectancy value. Purchase Decision - B etween purchase intention and purchase decision, 2 intervening factors come into play- Attitudes of others and Unanticipated situational factors. Marketers shou ld understand that these factors provoke risk and should provide information to reduce it. • Post purchase Behaviour - Marketers must monitor postpurchase satisfa ction, postpurchase actions, and postpurchase product uses. Chapter 6 - Analyzing Consumer Markets Trends Level of customer involvement Involvement High Low Differences in Brands Significant Complex Buying Behaviour Variety Seeking Insignificant Dissonance Reducing Habitual 1. Complex Buying Behaviour: When a customer purchases something for the first t ime. 2. Variety Seeking: Consumers will keep switching varieties just out of bor edom. Eg- Biscuits. Marketer should keep introducing new products and display th e product prominently. 3. Habitual: Buying the same thing out of habit and not o ut of loyalty. Distribution network should be excellent in this case. Maintain c onsistency in product and advertising. 4. Dissonance Reducing: In case of repeat purchase of same product. Marketing Management A A A Chapter 7 Analyzing Business Markets and Buyer Behavior Business buyers purchase goods and services to achieve specific goals, such as m aking money, reducing operating costs, and satisfying social or legal obligation s. Therefore to provide superior customer value to the business buyers this chap ter familiarizes you with the underlying dynamics and process of business buying

. Blanket contract establishes a long-term relationship in which the supplier pr omises to resupply the buyer as needed at agreed-upon prices over a specified pe riod. Because the seller holds the stock, blanket contracts are sometimes called stockless purchase plans. Product value analysis is an approach to cost reducti on in which components are carefully studied to determine if they can be redesig ned or standardized or made by cheaper methods of production. Organizational buying is the decisionmaking process by which organizations establish the need for purc hased products and services and identify, evaluate, and choose among alternative brands and suppliers. The Business Market versus the Consumer Market • • • Fewer buyers: Business marketers normally deal with far fewer buyers than do con sumer marketers. Larger buyers: Buyers for a few large firms do most of the purc hasing in many industries. Close supplier customer relationship: Smaller custome r base and importance of larger customers, suppliers have to customize offerings to meet the needs of individual customers. • Geographically concentrated buyers D erived demand: Demand for business goods is derived from demand for consumer goo ds, so business marketers must monitor the buying patterns of ultimate consumers . • Inelastic demand: Not much affected by price changes as producers cannot make quick production changes. • • Chapter 7 - Analyzing Business Markets and Buyer Behavior • Fluctuating demand: Demand for business products is more volatile than consumer products. • Professional purchasing: Organizational purchasing policies and constr aints are followed Multiple buying influences: More people typically influence b uying decisions Multiple sales calls: Multiple sales calls to win most business orders, and the sales cycle can take years. • • Direct purchasing: Business buyers o ften buy directly from manufacturers rather than intermediaries Reciprocity: Bus iness buyers often select suppliers who also buy from them. Leasing: Many indust rial buyers lease rather than buy heavy equipment to conserve capital, get the l atest products, receive better service, and gain tax advantages. • • • Three types of Business Buying Situations: Straight rebuy: situation in which the purchasing department reorders on a routi ne basis (e.g., office supplies, bulk chemicals). • • • The Buying Center (Decision-making unit of a buying organization) Seven roles in the purchase deci sion process: Initiators: People who request that something be purchased Users: use the product or service; often, users initiate the buying proposal and help d efine product requirements. Influencers: People who influence the buying decisio n, including technical personnel. Deciders: Those who decide on product requirem ents or on suppliers. Approvers: People who authorize the proposed actions of de ciders or buyers. Buyers: People who have formal authority to select the supplie r and arrange the purchase • Gatekeepers: People who have the power to prevent sel lers or information from reaching members of the buying center • • • Modified rebuy: situation in which the buyer wants to modify product specificati ons, prices, delivery requirements, or other terms. New task: situation in which a purchaser buys a product or service for the first time (e.g., office building , new security system).

Major Influences on Business Buying Environmental Factors Attention to numerous economic factors, including interest rates and levels of production, investment, and consumer spending. Business buy ers also monitor technological, politicalregulatory, and competitive development s. Organizational Factors Business marketers need to be aware of the following o rganizational trends in purchasing: • Purchasing department upgrading: Strategical ly positioned and highly Cross-functional roles: strategic, technical, team-orie nted, and involving more responsibility • • • • • Centralized purchasing: recentralized th eir purchasing, to gain more purchasing clout and savings. Decentralized purchas ing of small-ticket items Long-term contracts: Buyers are increasingly initiatin g long-term contracts Internet purchasing: Low transaction and personnel costs r educe time between order and delivery, purchasing companies moving towards inter net purchasing. Purchasing-performance evaluation & incentive systems and buyers’ professional • Chapter 7 - Analyzing Business Markets and Buyer Behavior • Lean production: incorporates just-in-time (JIT) production, stricter quality co ntrol, development frequent and reliable supply delivery, suppliers locating clo ser to customers, computerized purchasing, and stable production schedules. Major Influences on Business Buying: Interpersonal Factors Buying centers usually include several participants with d iffering interests, authority, status, empathy, and persuasiveness. Individual F actors Each buyer carries personal motivations, perceptions, and preferences, as influenced by the buyer’s age, income, 8 stages of PURCHASING PROCESS Stage 1: Problem Recognition Someone in the company recognizes a problem or need that can be met by acquiring a good or service. Internally, developing a new pr oduct, need for new equipment and materials or to obtain lower prices or better quality. Externally, occur when a buyer gets new ideas at a trade show, sees a s upplier’s ad, or is contacted by a sales representative offering a better product. Business marketers can stimulate problem recognition by direct mail, telemarket ing, effective Internet communications, and calling on prospects. Stage 2: Gener al Need Description The buyer has to determine the needed item’s general character istics and the required quantity. In this stage, business marketers can assist b uyers by describing how their products would meet such needs. Stage 3: Product S pecification Company assigns a product value analysis (PVA) to engineering team. By getting in early and influencing buyer specifications, a supplier can signif icantly increase its chances of being chosen. Stage 4: Supplier Search The suppl ier should get listed in online catalogs or services develop communications to r each buyers, and build a good reputation in the marketplace. After evaluating ea ch company, the buyer will end up with a short list of qualified suppliers Stage 5: Proposal Solicitation The buyer invites qualified suppliers to submit propos als. When the item is complex or expensive, the buyer will require a detailed wr itten proposal from each qualified supplier. education, job position, After evaluating the proposals, the buyer will invite a few suppliers to make formal personality, attitudes presentations. toward risk, and culture. Cultural Factors Marketers carefully study the culture and customs of each region to better understand can affect buyers and the buying organizati on. Stage 6: Supplier Selection The buying center specifies desired supplier attribu tes (such as product reliability and service reliability) and indicate their rel ative. A blanket contract may be established. The buyer’s computer automatically s ends an order to the seller when stock is needed, and the supplier arranges deli very and billing according to the blanket contract. Stage 7: Order-Routine Speci

fication The buyer negotiates the final order, listing the technical specificati ons, the quantity needed, the delivery schedule, and so on. In the case of MRO i tems, buyers are moving toward blanket contracts rather than periodic purchase o rders. Stage 8: Performance Review are used. The buyer may contact the end users and ask for their evaluations. Or the buyer may rate the supplier on several cr iteria using a weighted score method. Or the buyer might aggregate the cost of p oor supplier performance to come up with adjusted costs of purchase, including p rice. the cultural factors that The buyer periodically reviews the performance of the chosen supplier(s). Three methods Marketing Management A A A Chapter 8 Identifying Market Segments and Targets This chapter deals with one of the quintessential concepts of Marketing: STP i.e . Segmentation, Target and Positioning. It explains different levels of Market S egmentation, bases for Segmenting Consumer Markets, choosing target Markets & fi nally analyses the various requirement for effective segmentation. Mass Marketing: The seller engages in mass production, mass distribution and mass promotion of o ne product for all buyers Steps in market segmenta segmentation, tion, targeting and positioning 1. Market Segmentation 2. Target Marketing 3. Market Positioning •Identify Identify bases for segmenting the market •Develop Develop segment profiles •Develop Develop measure of segment attractiveness •Select Select target segments •De velop Develop positioning for target segments •Develop Develop a marketing mix for each segment Levels of Market Segmentation: Micromarketing A. Segment marketing: Dividing a market into distinct groups with distinct needs , characteristics, or wants who might require separate products or marketing mix es. Segment Marketing offers key benefits over Mass Marketing as the company can offer better design, price, disclose and also can fine-tune fine the marketing program to better reflect competitors marketing. B. Niche Marketing Marketing: A niche is a more narrowly defined customer group seeking a distinctive mix of be nefits. Marketers usually define niches by dividing segments into sub segments. egments. For e.g. Ezee, the liquid detergent from Godrej is a fabric washing pro duct for woolen clothes. Chapter 8 - Identifying Market Segments and Targets C. Local Marketing: Target marketing that involves marketing programs tailored t o the needs and wants of local customer groups in trading areas, neighborhoods a nd even individual stores is called as Local Marketing. E.g. Many Banks in Keral a have special ‘NRI Branches’ to cat cater er to the needs of customers whose relati ves remit money from abroad. D. Individual Marketing: This is the ultimate level of marketing that leads to “segments of one”,” customized marketing” or “one “one-to-one on e marketing”. Customerization empowers customers to de design sign the product and

service offering to their choice. For e.g. Asian Paints retailers facilitate cu stomers to mix and match colors of their choice from a catalogue. Bases for Segmenting Consumer Markets A. Geographic Segmentation: Division of the Market into different geographical U nits such as nations, cities, states, regions, neighborhoods etc • • • Region: South I ndia, Western Region, North, East City: Class Class-I cities, class-II cities, M etro cities etc Rural, urban , semi urban areas B. Demographic Segmentation: The market is divided on the basis of variables suc h as age, family size, family life cycle, gender, income, occupation, education, religion etc. Demographic variables are easy to measure and are directly associ ated with customer needs and wants FAMILY LIFE CYCLE STAGES Stage1: Bachelorhood Stage2: Honeymooners •Single,Focus Single,Focus of expenditure on self •Young Young married couple withou t kids,focus on building home and relation •Full Nest-I,1 I,1 child less than 6 yr s old •Full Nest-II,youngest II,youngest child under 6 •Full Nest-III: III: all adul t children •Children Children not living with parents •Empty Nest1 :Working •Empty Emp ty Nest2: Not Working •One spouse dies •SS-I: Working •SS-II: Not Working Stage3: Parenthood Stage4:Post Stage4:Post-ParentHood Stage5: Solitary Survivor(SS) C. Psychographic Segmentation: Here buyers are divided into different groups on the basis of psychological/personality traits, lifestyles or values. • • Lifestyle: Culture-oriented, oriented, sports oriented, outdoor oriented. Classification is done on three parameters: AIO-Activities, Activities, Interests and Opinions. P ersonality: Compulsive, gregarious ,authoritarian ,ambitious D. Behavioral segme ntation: Buyers are divided on the basis of their knowledge of, attitude toward, use of, or response to a product. The behavioral variables are as follows: Chapter 8 - Identifying Market Segments and Targets • • • • Usage Rate: Light, Medium, Heavy Loyalty Status: None, medium, strong, absolute Readiness Stage: Unaware, aware, informed, med, interested, desirous, intending to buy Attitude towards Product: Enthusiastic, positive, indifferent, negative, hostile Requirements for Effective Segmentation Evaluating and Selecting Market Segments Five patterns of target market selection that can be followed are: • • • • • Single Segmen t Concentration: Concentrated Marketing where the firm gains a strong knowledge of segments needs and acquires a strong market presence Selective Specialization : a firm selects a number of segments. Each objectively attractive and appropria te, there may be little or no synergy between the segments segme Product Special ization: The firm makes a certain product that it sells to several different mar ket segments. Market Specialization: The firm concentrates on serving many needs of a particular customer. Full Market Coverage: The firm attempts to serve all a customer groups with all products they may need. E.g. Coca Cola (non (non-alco holic alcoholic beverage segment), Microsoft (Software Market) etc. P = Product M = Market

Marketing Management A A A Chapter 9 Dealing with Competition Building strong brands requires a keen understanding of competition. To effectiv ely devise and implement the best possible brand positioning strategies, compani es must pay attention to their competitors. Markets have become too competitive to just focus on the consumer alone. Vertical Integration is to integrate backward or forward i.e. with suppliers and Technological is a bypass strategy practiced in high-tech industries. The challenger patiently researches and develops the next technology and launches an attack, shifting th e battleground to its costumers which often lowers costs and can manipulate prices and costs in differ ent parts of the value chain. is the art of learning from companies that perform certain tasks leapfrogging Be nchmarking better than other companies. Competitive Forces (Michael Porter’s 5 forces) 1. Threat of intense segment rivalry - segment is unattractive if it contains nu merous, strong, or aggressive competitors. 2. Threat of new entrants - segment s attractiveness varies with the height of its entry and exit barriers. The most attractive segment has high entry barriers and low exit barriers. 3. Threat of s ubstitute products - A segment is unattractive when there are actual or potentia l substitutes for the product. 4. Threat of buyers growing bargaining power - A segment is unattractive if buyers possess strong or growing bargaining power. 5 . Threat of suppliers growing bargaining power - A segment is unattractive if t he company s suppliers are able to raise prices or reduce quantity supplied. Identifying Competitors • • • • Entry, Mobility, And Exit Barriers Cost Structure Degree Of Vertical Integration Degree Of Globalization territory, where it has Industry Concept • Number Of Sellers And Degree Of Differe ntiation an advantage. Marketing Concept According to marketing approach, competitors are companies tha t satisfy the same customer need. The market concept of competition reveals a br oader set of actual and potential competitors. By mapping the buyer s steps in o btaining and using the product a company s direct and indirect competitors can b e identified. Trends • • Chapter 9 - Dealing with Competition Analyzing Competitors Strategies: What strategies a company uses to enter/survive in the market? Objec tives: What are the objectives of the competitor’s and what drives its behavior? F

actors shaping a competitor’s objectives include size, history, current management , and financial situation. Strengths and Weaknesses: A company needs to gather i nformation on each competitor s strengths and weaknesses. Selecting Competitors: Strong versus Weak: Weak require fewer resources per share point gained. The fir m should also compete with strong competitors to keep up with the best. • Three Important Variables for analyzing competitors • Share of market - The compet itor s share of the target market. • Share of mind - The percentage of customers w ho named the competitor in responding to the statement, "Name the first company that comes to mind in this industry." • Share of heart - The percentage of custome rs who named the competitor in responding to the statement, "Name the company fr om which you would prefer to buy the product." Companies that make steady gains in mind share and heart share will inevitably make gains in market share and pro fitability. Competitive Strategies for Market Leaders Expanding the Total Market New customers: Potential new users maybe divided into three groups: • Those who might use it but do not (market-penetration strategy) • T hose who have never used it (new-market segment strategy) • Those who live elsewhe re (geographical-expansion strategy) More usage: Two ways of increasing usage • In creasing the level or quantity of consumption: through packaging or product desi gn or by increasing the availability of product • Increasing the frequency of cons umption: identifying completely new and different ways to use the brand and comm unicate the advantages of using the brand more frequently Close versus Distant: Most companies compete with competitors who resemble them the most "Good" versus "Bad": should support its good competitors (Play by the rules) and attack its bad competitors. Defending Market Share The most constructive response is continuous innovation. The leader leads the in dustry in developing new product and customer services, distribution effectivene ss, and cost cutting. It keeps increasing its competitive strength and value to customers. • Position Defense: It involves occupying the most desirable market spa ce in the minds of the consumers • Flank Defense: the market leader should also er ect outposts to protect a weak front or possibly serve as an invasion base for c ounterattack. • Preemptive Defense: A more aggressive maneuver is to attack before the enemy starts its offense. A company can launch a preemptive defense in seve ral ways • Counteroffensive Defense: the leader can meet the attacker frontally or hit its flank or launch a pincer movement. An effective counterattack is to inv ade the attacker s main territory so that it will have to pull back to defend th e territory. • Mobile Defense: In mobile defense, the leader stretches its domain over new territories that can serve as future centers for defense and offense th rough market broadening and market diversification. • Contraction Defense: giving up weaker territories and reassigning resources to stronger territories. Chapter 9 - Dealing with Competition Competitive Strategies for Market Follower: A market follower must know how to hold current customers and win a fair share o f new customers. It must keep its manufacturing costs low and its product qualit y and services high. Four broad strategies can be distinguished: • Counterfeiter d uplicates the leader s product and package and sells it • Cloner - emulates the le

ader s products, name, and packaging, with slight variations. • Imitator - copies Expanding Market Share A company should consider four factors before pursuing increased market share: • T he possibility of provoking antitrust action • Economic cost • Pursuing the wrong ma rketing-mix strategy • The effect of increased market share on actual and perceive d quality Competitive Strategies for Market Challengers Defining the Strategic Objective and Opponent(S) A market challenger must decide whom to attack: It can attack the market leader. This is a high-risk but potent ially high-payoff strategy It can attack firms of its own size that are not doin g the job and are underfinanced It can attack small local and regional firms Cho osing a General Attack Strategy • Frontal Attack: The attacker matches its opponen t s product, advertising, price, and distribution • Flank Attack: Identifying shif ts in market segments geographic areas that are causing gaps to develop, and the n rushing in to fill the gaps and develop them into strong segments. • Encirclemen t Attack: The encirclement involves launching a grand offensive on several front s. Make sense when the challenger commands superior resources • Bypass Attack: It means bypassing the enemy and attacking easier markets to broaden one s resource base. Three lines of approach: diversifying into unrelated products, diversifyi ng into new geographical markets, and leapfrogging into new technologies to supp lant existing products. • Guerrilla Warfare: Small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds (selectiv e price cuts, intense promotional blitzes, and occasional legal action) Few more specific strategies: Price discount, Lower price goods, Value-priced goods and services, Prestige goods, Product proliferation, Product innovation, improved se rvices, Distribution innovation, Manufacturing-cost reduction, Intensive adverti sing promotion Competitive Strategies for Market-Nicher • The nicher achieves high margin, whereas the mass marketer achieves high volume. Nichers some things from the have three tasks: creating niches, expanding niche s, and protecting niches. Because niches can weaken, the firm must continually c reate new ones therefore multiple niching is leader but maintains preferable to single niching. The key idea in successful nichemanship is specialization. Here are some possible niche roles: differentiation in • End-user specialist: The firm specializes in serving one type of end-use customer. terms of packaging, • Custome r-size specialist: The firm concentrates on selling to small, medium-sized, or l arge customers. advertising, pricing, • Geographic specialist: The firm sells only in a certain locality, region, or area of the or location. world. • Product-featu re specialist: The firm specializes in producing a certain type of Adapter - tak es the product or product feature leader s products and • Quality-price specialist : The firm operates at the low- or high-quality ends of the market adapts or imp roves • Channel specialist: The firm specializes in serving only one channel of di stribution them. Marketing Management A A A Chapter

10 Creating Brand Equity It is important for the marketer to create a strong brand and maintain customer loyalty. This chapter talks about the concepts of brand and how branding works. We will understand what brand equity is, how it is built and measured as well as the decisions involved in branding strategy. Brand: A name, term, sign, Brand Equity Added value endowed on products and services. Reflected in way consumers think, feel and symbol or design, or a act with respect to a brand. Customer based brand equity – differential effect brand combination of them, knowledge has on customer respons e to the marketing of a brand. Maybe positive or intended to identify the goods or services of one seller or group of sellers and to differentiate them from tho se of competitors. • negative depending on how consumers respond. It has three key ingredients – • • Brand equity arises from differences in customer response Differences in response are a result of consumer’s knowledge of the brand. Brand Knowledge consists of all tho ughts, feelings, images, experiences, beliefs and so on that become associated w ith the brand The differential response is reflected in perceptions, preferences and behaviour related to all aspects of the marketing of the brand Marketer mus t build a strong brand that ensures that the consumers have the right experience s. Brand Promise Marketer’s vision of what the brand must be and do for the consumers. The true and future value depends on customers, their brand knowledge and their likely respo nse to marketing activity. Chapter 10 - Creating Brand Equity Trends Brand Equity Models Brand Asset Valuator It provides comparative measures of the brand equity of thousands of brands acro ss hundreds of different categories. Up and coming/Niche Leaders Google USA Pringles Nike Brand Element: Those trademark able devices that identify and differentiate the brand. Most str ong brands employ multiple brand elements. Brand element choice criteria include s 6 main parameters – first three being memorable, meaningful and likable (‘brand bu ilding’) and last three being transferable, adaptable and protective (‘defensive’). Energized Brand Strength (Differentiation, Relevance, Energy) JetBlue Ikea TiVo Redbull Declining Leaders Kodak AAA Tide New/Undeveloped Blackberry Sephora SAP Brtish Airways Eroded/Commoditized Centrum Entertainment Weekly Wells Fargo Budget Rent-A-Car

Brand Structure (Esteem & Knowledge) (E There are the model – 1. Differentiation – degree to which a brand rs 2. Energy – brand’s sense of momentum 3. Relevance eem – how well the brand is regarded and respected 5. ntimate customers are with the brand

five key components of the is seen as different from othe – breadth of brand’s appeal 4. Est Knowledge – how familiar and i

Brand Resonance Model Creation of significant brand equity requires reaching the top or pinnacle of th e brand pyramid, which occurs only if the right building blocks are put into pla ce. Resonance Judgement Feelings Performance Imagery Salience • • • • Chapter 10 - Creating Brand Equity Trends Brand Salience – how often and how easil y customers think of the brand under various purchase or consumption situations. Brand Performance – how well the produ ct or service meets customers’ functional needs Brand Imagery - describes the extr insic properties of the product or service; also the way in which brand attempts to meet customers’ psychological or social needs Brand Judgements – focus on custom ers’ own personal opinions and evaluations Brand Feelings – customers’ emotional respo nses and reactions with respect to the brand Brand Resonance – nature of the relat ionship customers have with the brand and the extent to which they feel they’re “in sync” with it Brand Reinforcement Brand needs to be managed so its value does not depreciate. Brand equity reinfor ced by marketing actions that consistently convey the meaning of the brand in te rms of what it represents and how it makes the products superior. Reinforcing re quires innovation and relevance throughout the marketing program. • • Brand Audit – consumer focussed series of procedures to assess the health of the brand, uncover its sources of brand equity and suggest ways to improve and lever age its equity. Brand Valuation – Job of estimating the total financial value of the brand. Devising a Brand Strategy When a firm introduces a new product it has 3 choices – • • • Develop new brand elements for the new product Apply some of the existing brand elements (Product is calle d brand extension) Use a combination of new and existing brand elements (Maybe c alled a sub brand) Brand Portfolios Marketers need multiple brands to cater to multiple markets. The reasons for div ersifying the brand portfolio 1. Increasing shelf presence and retailer dependen ce in the store 2. Attracting customers seeking variety who may otherwise have s witched to another brand 3. Increasing internal competition within the firm 4. Y ielding economies of scale in advertising, sales, merchandising and physical dis tribution

Customer Equity Sum of lifetime values of all customers. The aim of Customer Relationship Manage ment (CRM) is to produce high customer equity. Marketing Management A A A Chapter 11 Crafting the Brand Positioning This chapter illustrates how a firm can choose an effective positioning in the m arket and differentiate its brand. It describes the various strategies a firm ca n employ at each stage of a products life cycle and finally shows the implicatio ns of Market evolution for marketing Positioning: Positioning is the act of designing the company’s offering and image to occupy a d istinctive place in the minds of the target market. Positioning requires determi ning on a frame of reference based on the following factors: strategies. Developing and Communicating a Positioning Strategy Category Membership: products or set of products with which the brand competes and which function as close substitutes. Points of Difference (POD): in another brand. Attributes or benefits consumers strongly associate with a brand, positively evaluate and believe they could not find to t he same extent Points of Parity (POP): They are associations that are not unique to the brand but in fact maybe shared with other brands. It has two forms: • • Category Points of Parity: Associations customers view as essential to a legitimate and credible o ffering within a certain product or service category. Competitive Points of Pari ty: Associations designed to negate a competitor’s pointsof-difference. 1. Identifying the target market. 2. Analyzing the competition. Choosing POPs and PODs POPs: They are driven by the needs of category membership (to create category PO Ps) and the necessity of negating competitors’ PODs (to create competitive PODs) P ODs: The following two criteria are considered while choosing POP’s Desirability C riteria Relevance Distinctiveness Believability Deliverability Criteria Feasibil ity Communicability Sustainability Chapter 11 - Crafting the Brand Positioning Establishing category membership The typical approach to positioning is to inform consumers about a brands catego ry membership before stating its points of difference. Initial advertising often

concentrates on create brand awareness and subsequent advertising attempts to c raft the Brand Image. Differentiating Strategies Competitive Advantages It is a company’s ability to perform in 1 or more ways that competitors can’t match. Two Straddle Positing: It is a common positioning technique used when a company tries to straddle betwe en two frames of reference. E.g. BMW through a well crafted marketing program st raddled ‘Luxury’ and ‘Performance’ as both POD and POP. sustainable competitive advantages are: • • Leverageable Advantage: is one that a co mpany can use as a springboard to new advantages Customer Advantage: is an advan tage that a customer sees in the company’s offering Dimensions to differentiate Market Offerings • • • Personnel differentiation: Better trained employees E.g. smartly dresses flight attendants of Kingfisher Airlines. Channel Differentiation: more effectively and efficiently designed channels, coverage, expertise and performance. Image diffe rentiation: Companies can craft powerful compelling images. E.g. Marlboro’s “macho c owboy” image. Product Lifestyle Marketing Strategies Most product life-cycle curves are portrayed as bell shaped curves. A company’s positioning and differentiation strategy must change as the product, m arket and competitors change over the product life cycle (PLC). Chapter 11 - Crafting the Brand Positioning Trends Summary of Product Lifecycle Characteristics, Objectives and Strategies Introduction Characteristics Sales Low Sales High Cost per customer Negative Inn ovators Growth Rapidly rising sales Maturity Peak Sales Decline Declining Sales Low cost per customer Declining Profits Laggards Maturity: When the Costs Profits Average Cost per Low cost per customer customer Rising Profits Early Adopters Hi gh Profits Middle majority competitors cover all Customers major segments of Marketing the market maturity stage occurs. Competitors invade each others profits slows down, market splits i nto finer segments and market segmentation occurs. This is often followed by mar ket consolidation caused by the emergence of a new attribute that has greater ap peal. Mature markets swing between fragmentation and consolidation. • Advertising Distribution Price Strategies Objectives Create product awareness and trial Offer a basic product Maximize market Maximize profit while defending share market share Reduce expenditure and milk the brand and as market growth Product Offer product Diversify brands Phase out weak extensions, and items models produ

cts service, warranty Charge cost-plus Price to penetrate Price to match or Cut price market best comp etitors’ Build selective distribution Build product awareness among early adopters Build Intensive distribution Build awareness and interest in mass market Build more intensive distribution Stress brand differences and benefits Go selective: phase out unprofitable outlets Reduce to level needed to retain hard-core loyals Reduce to minimum level Sales Promotion Use heavy sales Reduce to take Increase to promotion to advantag e of encourage brand heavy consumer switching entice trial demand Market Evolution Emergence: Before a market materializes it exists as a latent market. Here the e ntrepreneur has three options: 1. Single Niche Strategy: Design a product to mee t preferences of 1 segment of the market 2. Multiple-Niche Strategy: Launch 2 or more products simultaneously to capture 2 or more parts of the market 3. Mass M arket Strategy: Design a product for the middle of the Market • • 1. 2. Maturity Dec line: Eventually demand for the current products will begin to decrease because either: Society’s total need level declines New Technology replaces the old Marketing Management A A A Chapter 12 Setting Product Strategy Product is the first and the most important element of a marketing mix. This cha pter deals with various product strategies for making coordinated decisions on p roduct mixes, product lines, brands, packaging, labeling and warranties and guar antees. Product Levels Marketers need to address 5 product levels: Product: Anything that can be offered to a market to satisfy a need or want, including ph ysical goods, services, experiences, events, persons, places, properties. • • • • Core Benefit: The benefit a customer really buys. E.g. Hotel guest buys rest and sleep Basic Product: e.g. hotel room includes bed, bathroom, desk, dresser, clo set, towel etc Expected product: attributes that buyers normally expect along wi th their product. Augmented product: attributes that exceed buyer expectations. In developed countries, brand positioning and competition take place at this lev el, while in developing countries it takes place at ‘expected product’ level. • Potential product: it encompasses all the augmentations and transformations the product or offering might undergo in the future. Product classification

• Durability and tangibility 1. Nondurable goods: tangible goods that are normally consumed in a day or two. E.g.: soaps, soft drinks. They are purchased frequent ly, thus should be made available in many locations, charged a small markup, and advertised heavily to induce trial. 2. Durable goods: tangible goods that survi ve many uses. E.g. Clothes, machines. Require more personal selling, higher marg ins, more seller guarantees. 3. Services: intangible, variable, perishable produ cts. E.g. Haircuts, repairs. Require more quality control, supplier credibility, adaptability. • Consumer goods classification: done on the basis of shopping habi ts. 4 types1. Convenience goods: purchased frequently, immediately, with minimum effort Staples: purchased on regular basis Impulse goods: purchased w/o plannin g e.g. Chocolates Emergency goods: purchased when need is urgent e.g. Umbrellas Chapter 12 - Setting Product Strategy 2. Shopping goods: goods that consumer compares based on suitability, price etc Homogeneous: similar in quality but different in price. Heterogeneous: similar i n price but different in product features. E.g. Cars, men’s suits etc. they don’t re quire comparison. Insurance, reference books. Require advertising and personal s elling. • production process1. Materials and parts: those that enter the manufactu rer’s product completely. 3. Specialty goods: they have unique characteristics for which consumers can spe nd mo 4. Unsought goods: those that consumers do not know about or think of buying. E Industrial goods classification: done on the basis of relative cost and how they enter t Straddle Positing: It is a common positioning technique used when a company tries to straddle betwe en two frames of reference. E.g. BMW through a well crafted marketing program st raddled ‘Luxury’ and ‘Performance’ as both POD and POP. Raw materials: 2 kinds- Farm products, which are seasonal and require spec marketing apart from advertising, and Natural products, which are limited in sup p Manufactured materials and parts: 2 kinds- component materials (e.g. Iro tires. These enter the final product w/o change.) products. They includethat personal s elling important than advertising. They includeMaintenance and repair items. E.g . Paint, broom. Operating supplies. E.g. Lubricants, writing paper, pencils. pro ducts. They includeMaintenance and repair services. E.g. Air conditioner mainten ance. Business advisory services. E.g. Management consulting, advertising. cement. These are usually fabricated further), and component parts (e.g. Moto 2. Capital items: long lasting goods that facilitate developing or managing the finish Installation: includes buildings and heavy equipments. Advertising less importa Equipment: includes portable factory tools and equipments. Sales force mo 3. Supplies: short term goods that facilitate developing or managing finished pr oduc 4. Business services: short term services that facilitate developing or managing finish

Product Differentiation Form: this includes size, shape, physical structure. Fea tures: they supplement the basic function of the product. Company must compare c ustomer value v/s company cost for each potential feature. Customization: requir es gathering and using information about consumers. Mass customization is the ab ility of a company to meet each customer’s requirements. Performance quality: it i s the level at which a product’s primary characteristics operate. 4 performance le vels- low, average, high, and superior. The level must be appropriate to the tar get segment and not necessarily the best. Conformance quality: the degree to whi ch all produced units is identical and meets the promised specifications. Durabi lity: buyers generally pay more for more durable products. However, the extra pr ice must not be excessive and the product must not be subject to rapid technolog ical obsolescence Reliability: probability that a product will not fail within a specified time period. Reparability: the ease of fixing a product when it malfu nctions or fails Style: the product’s look and feel. Creates distinctiveness that is difficult to copy. Differentiation Chapter 12 - Setting Product Strategy Services Differentiation Ordering ease: ease of placing an order Delivery: inclu des speed, accuracy, and care throughout the process. Installation: work done to make a product operational in its planned location. Becomes a selling point whe n the target market is technologically novice. Customer training: training custo mer’s employees to use vendor’s equipment efficiently and properly. Customer consult ing: data, information and advice services that seller offers to buyers. Mainten ance and repairs: helps customers keep products in working order. Returns: they are of two types1. Controllable: result from problems, difficulties, or errors o f seller or customer and can be eliminated with proper strategies. 2. Uncontroll able: can’t be eliminated by the company in the short run. Product line length: Companies seeking higher market share have longer product lines, those seeking h igher profitability have shorter product lines. They lengthen over time. Excess manufacturing forces production of newer items. However, other costs increase an d thus some non performing items are eliminated. • • • • Product Hierarchy 1. Need family: the core need that underlies the existence of a product family. E.g. Security. 2. Product family: product classes that satisfy a core need. E.g. Savings and income 3. Product class: a group of products within a family that h ave functional coherence 4. Product line: a group of products within a class tha t perform similar function, are sold to same customers, are marketed through sam e channels. E.g. Life insurance. 5. Product type: a group of items within a line that share of possible forms of the product. E.g. Term life insurance. 6. Item: a distinct unit within a brand or product line distinguishable by size, price, appearance, etc. ICICI prudential term life insurance. Product system: compatible manner. a group of diverse but related items that function in a Product Mix It is the set of all products and items a particular seller offers for sale. Wid th: how many product lines the company carries. Length: the total no. of items i n the mix. Depth: how many variants are offered of each product in the line? Con sistency: how closely related the various product lines are in end use.

Product line Product line analysis: based on – • Sales and Profit: a company can classify its pro ducts based on the margins. o Core products: basic products that have a high sal es volume but with low margins as they are essentially undifferentiated commodit ies. E.g. Basic computers. o Staples: lower sales volume, higher margins, no pro motions. E.g. Faster CPU o Specialties: lower sales volume, highly promoted. E.g . Installation, delivery. o Convenience items: peripherals selling in high volum es, less promotion, high margins. E.g. Software, carry cases. • Market Profile: pr oduct line managers must review how the line is positioned against competitor’s li nes. Chapter 12 - Setting Product Strategy Line stretching: occurs when companies try to go beyond their current range offered. Companies stretch in the following ways• Down Market Stretch: introducing lower-priced line than the one being offered. It can be risky as the price may not be less enough for competitors or some customers may shift the cheaper versi on. • • Up-Marker Stretch: entering high end of market for better growth, higher mar gins. Two way Stretch: middle level companies entering both high end and low end markets. Helps in establishing market dominance. E.g. Titan started as mid leve l watch, and then introduced Sonata for low end and Edge, Xylus for high end. No te: a high end model of a low end brand is preferred over a low end model of a h igh end brand. Line filling: lengthening product line by introducing more items in the present range. Line modernization, Featuring and Pruning: product lines need to change with the times. Can be done piecemeal or all at once. Piece meal allows company to gauge the effect of change on consumers, but allows compe titors to copy and pose greater challenge. Improvements must not occur too early (as they will affect sales of current product) and too late (as competitors wou ld get more time). The company may choose between featuring their most selling i tems and promoting their weak items from time to time. Companies also need to op timize their brand portfolio. For this, they need to identify the weak items, an d weed them away. E.g. Unilever found only 400 of its 1600 items generated 90% o f company’s profits. Product-Mix Pricing: searching for a set of prices that maximizes profits on the total mix. • • Product Line Pricing: companies develop product lines and introdu ce price steps. Their task is to establish perceived quality differences that ju stify price differences. Optional Feature Pricing: e.g. Automobile cos. Advertis e entry level models at low prices to attract more customers. These modes are st ripped of several features that buyers usually end up buying. • • • • Captive Product Pr icing: e.g. Manufacturers of razors price them low and set high markups on razor blades. If price is too high, counterfeiting and substitutions can erode sales. Two-Part Pricing: fixed fee+ variable usage fee. Fixed fee should be low to enc ourage more sales; profit can be maximized from variable fees. By-Product Pricin g: e.g. Production of petroleum products produces several by products. If produc er can sell these to the customer, he can price the main product lower. Product Bundling Pricing 1. Pure bundling: products offered only as bundles. E.g. tour o perators bundle stay and travel. 2. Mixed bundling: products offered individuall y as well as in bundles. E.g. Auto manufacturers. Customers may not plan to buy all components, but may be lured by the saving. Chapter 12 - Setting Product Strategy Co-Branding: 2 or more brands are combined into a joined product or are

marketed together in some fashion. It includes same company co-branding (Gillett e launched Mach 3 Turbo with its shaving gel), joint venture co-branding (Indian oil and Citibank cobranded credit cards), multiple sponsor co-branding ( Talige nt, a one time alliance of Apple, IBM and Motorola) and retail co-branding (2 re tail establishments using the same location to optimize space and profits). It a llows products to be convincingly positioned and generating greater sales as 2 w ell known images are combined. However, consumer expectations with the level of involvement are high, so an unsatisfactory performance will be damaging for the partner company as well. Ingredient Branding: special case of cobranding. It created brand equity for materials, components, p arts that are contained products. Ingredient brands create preference for their products so that a host product which does not have that ingredient. For co-branding to succeed, both brands must have brand equity, and must fit in terms of values, goals and capabilities.

Packaging: activities of designing and producing containers for a product. Packa ges may include 3 levels of materials. Package is the buyer’s first encounter with the product. Factors leading to growing use of packaging: • • • • • • • • • • • • • Self service luence Company and brand image: package leads to instant recognition of brand In novation opportunity: packaging can be used to target different segments. Identi fy the brand Convey descriptive and persuasive information Facilitate product tr ansportation and protection Assist at-home storage Aid product consumption Engin eering tests: ensure that package stands up under normal circumstances Visual te sts: ensure that script is legible and colors harmonious Dealer tests: dealers s hould find package attractive and easy to handle Consumer test: buyers must resp ond favorably within other branded Packaging needs to achieve the following objectives: customers do not but After designing, the packaging needs to be tested: Labeling: labels identify the product, grade the product, describe the product a nd promote the product (through attractive graphics). Warranties and Guarantees: returned to the manufacturer for replacement, repair. warranties are formal statements of expected product performance by the manufacturer. Products under warranties can be Guarantees reduce the buyer’s perceived risk. They are especially helpful when the company is not well known or when product quality is superior to that of com petitors. Marketing Management A A A Chapter 13 3

Designing and Managing Services Today as product companies find it harder and harder to distinguish their physic al products, Service marketing is different from goods marketing as service consumer relies on word of mouth, they rely heavily on price, personnel & physical cues to judge quality. They are hig hly loyal to service providers who satisfy them & because switching costs are hi gh, consumer inertia can make it challenging to entice a customer away from a co mpetitor. they turn to service differentiation. Service providers find significant profita bility in delivering superior services. How do we define and classify services and how do they differ from goods • A service is any act or performance one party can offer to another that is essen tially intangible and does not result in the ownership of anything .Its producti on may or may not be tied to physical product Categories of services mix. • • • Servic es can be equipment based or people based & they differ in their objectives and ownership. Service companies can choose among different processes to deliver the ir service. Services needs client presence & may meet a personal or business nee d. Categories of services mix Pure Tangible Goods • No services accompany the product. E.g Soap,toothpaste •The Th e offering accompanied by one or more services E.g Computers, Cell Phones & cars •The The offering contains equal parts goods and services. E.g restaurants •The The offering consists of major service along with additional services or supporting goods. E.g Airplane travel alog with its services •The The Offering consists of o nly a service.E.g psycotherapy Tangible Goods with accompanying services Hybrid Major service with accompanying minor goods and services Pure Service Chapter 13 - Designing and Managing Services Holistic Marketing for Services External Marketing •It It describes the normal work of preparing,pricing,distribut ion,and promoting the service to customers. Internal Marketing •It describes the training and motivating employees to serve the customers well.En gage every employee in the organization to practise marketing Interactive Marketing •It describes the employee skills in serving the client Distinctive Characteristics of Services Intangibility • Services are intangible Service marketers must be able to transform intangible s ervices into concrete benefits. Inseparability • Services are typically produced and consumed simultaneously .Thus service provid ers must learn to work in larger groups to provide services to customers •Services Services are variable and buyers are aware of this variability and often talk t o others about quality before selecting a services. •Invest In Good Hiring •Standard ize the service-performance performance process •MonitorCustomer Satisfaction proc

ess •Services Services cannot be stored hence there is always a mismatch between d emand & supply.Stratgies that marketers must use : •Demand Side - Differential Pri cing,Nonpeak Demand,Complementary Services,Reservation Systems •Supply Side - Part -Time Time employees ,Peak Time efficiency,Increased consumer participation,shar ed services,Facilities for future expansion Variability Perishability Developing Brand Strategies for services Chosing Brand Elements Focus on logos,symbols,slogans to build brand awareness Establishing Image Dimensions desgin marketing communication, information programs and building brand personal ity Devising Branding Stratgey Create a brand hierarchy and brand portfolio that per mits positioning, targeting of different market segments Provide Post-Sales Sale s support Identify what is most valuable to customer and include repair & maintainence ser vices Chapter 13 - Designing and Managing Services Trends Best Practices of Service Qu ality Management STRATEGIC COMPONE NT •Top companies are customer obsessed •They have clear sense of target customer and their need TOP MANAGEM ENT COMMITME NT •Thorough commitme nt to service e.g Marriot,Xer ox •Bot h financial & service performanc e monitored by top manageme nt HIGH STANDARDS •Setting high service standards •developing reliable,resi lient & inn ovative customer Intefrace systems SELFSERVICE TEHNOLOGI ES •replacing person to person interaction s with self servi ce technologie s e.g ATMs •Helping customers to use these facilities MONITORIN G SYSTEMS •Auditing service performanc e of own & competitor s SATISFYING EMPLOYEES & CUSTOMERS •Instilling a possitive attitude about customer s atisfaction in employees Marketing Management A A A Chapter 14 Developing Pricing Strategies and Programs Traditionally, price has been the major determinant of a buyers’ choice. And this is still the case with large segments of markets across the world. Although nonprice factors have recently risen in importance, pricing remains an important fa

ctor in determining sales and Pricing Environment: Many firms are nowadays following the low-price trend and have seen success in c onverting the acquired customers to more expensive products by combining unique product formulations and engaging marketing campaigns. profitability. Also, price is the only component in the marketing mix that provi des revenue and not costs. Buyers can : • Get instant price comparisons from thousands of vendors: Websites like pricescan .com offer data about products like prices and reviews from hundreds of merchant s. • Name their prices: The consumer can state his desired price for a product and find the seller willing to meet this price on sites like priceline.com. Also, v olume-aggregating sites collate orders from many customers and press the supplie r for a deeper discount. • Get products free: The open source software movement ha s eroded margins for almost any major software player. Also, the recent emergenc e of low-cost airlines providing tickets only for the amount of taxes levied on a ticket is an example how firms have been successful with free offerings. Sellers can : • Monitor customer behaviour and customize offers: Firms use software to analyse p ricing requests with pricing factors such as past sales data, discounts, etc. to reduce processing time of these requests greatly. • Offer certain customers speci al prices: Certain customers are offered lower prices by firms in order to captu re a certain market segment on ensure the loyalty of existing customers further. Setting the price Firms set a price when they introduce a new product, or venture into a new marke t with an existing product. This is usually achieved by following a six-step pro cess as follows Chapter 14 - Developing Pricing Strategies and Programs Consumer psychology and pricing: • Reference prices: Consumers often employ reference prices, comparing an observed price to an internal reference price or a posted ‘regular retail price’. Sellers ma nipulate this by product positioning, suggesting that the actual price of the pr oduct is much higher or by pointing to a competitor’s high price. Step 1: Selecting the Pricing Objective – The firm first decides where it wants to position its market offering. The five major pricing objectives are • • • Survival: C ompanies pursue survival if they are plagued with over-capacity, intense competi tion, or changing consumer wants. Maximum current profit: Many firms try to set a price that maximises their current profits and delivers a high return on inves tment. Maximum market share: Here, firms believe that a higher sales volume will lead to lower unit costs and higher long-run profits and thereby maximise their market share. • Maximum market skimming: Companies offering new technologies ofte n set high prices initially in order to gain high profits from various segments of the market early on. • Product-Quality Leadership: Many firms aspire to be the product-quality leader in the market. Step 2: Determining Demand – Each price lead s to a different level of demand and therefore has a different impact on a compa ny’s marketing objectives. The factors entailing this are • Price Sensitivity: The r elation between price and demand, i.e. the demand curve can be analysed to deter mine the market’s probable purchase quantity at various prices. This helps a firm to maximise its profits. • Estimating Demand Curves: Most companies use the follow ing methods to estimate

• Price-Quality inferences: demand curves: Market Surveys, Price Experiments, Stat istical Analysis, etc. Many consumers use price • Price Elasticity: Marketers need to know how responsive, or elastic, the demand would be, to a change in price. If the price elasticity is high, increasing prices would as an indicator of qual ity. lead to a great reduction in demand, while decreasing prices would lead to increase High-price cars are in demand. Hence, marketers prefer inelastic market s where price changes do not perceived to be of higher elicit great shifts in de mand. quality and vice versa. • Price cues: Consumer perceptions of prices are als o affected by the manner in which prices are displayed. Many sellers believe set ting a price of Rs.2999 puts a product into the 2000 range instead of the 3000 r ange as perceived by the consumer. Putting ‘Sale’ signs near the price display have also been known to be effective. Step 3: Estimating Costs – While demand sets a ceiling on the range of price a fir m can charge for its product, costs determine the floor. • Types of Costs and Leve ls of Production: Costs are classified as Fixed costs and Variable costs. Fixed costs include salaries, electricity bills, etc. which do not depend upon quantit y produced. Variable costs include processing costs, packaging costs, shipping c osts, etc. which depend upon quantity produced. Hence, companies must decide on a level of production which will more or less guarantee no losses on the cost of production. • Accumulated Production: As firms gain experience in production of a good, the costs involved begin to decline. This is due to various factors such as workers finding shortcuts, smoother flow of materials, etc. This decline in c ost with production experience is called experience curve. • Target Costing: Other than production scale and experience, costs also change a result of concentrate d efforts by designers, engineers, purchase agents etc. They examine each cost c omponent and try to find ways to reduce the costs involved in each of these. Initiating and Chapter 14 - Developing Pricing Strategies and Programs Step 4: Analyzing Compet itors – The introduction of any change in price, cost, offers given by Trends any seller can elicit a response in the market. A firm must analyse the value of fered by a competitor to a customer in terms of prices, addons, post-sale servic es, etc. and thereby modify its own price in order to be competitive in the mark et. Step 5: Selecting Pricing Methods – There are six major pricing methods: • • • Markup Pricing: The most elementary pricing method is to add a standard mark-up to t he producer’s cost. Target-return Pricing: In target-return pricing, the firm dete rmines the price that would yield its target return on investment. Perceived-val ue Pricing: Perceived-value pricing is made up of several factors like the buyer’s image of the product, the channel deliverables, warranty quality, customer supp ort, supplier’s reputation, etc. • Value Pricing: Here, high quality products are as signed a fairly low price. The basic aim here is to attract a value-conscious cu stomer base by reengineering the company to become a low-cost producer without s acrificing quality. • • Going-rate Pricing: Here, firms base their prices largely on competitors’ prices, charging nearly the same as major competitors in the market do. Auction-type Pricing: There are three types in this pricing method – English A uctions (Ascending bids): Here, the seller puts up an item and the bidders raise the price until the top price is reached. Dutch Auctions (Descending bids): Her e, the seller announces a high price and then goes on lowering the price until a bidder accepts it. Or, a buyer announces his desire for a product and sellers c ompete to offer him the lowest price. Sealed-bid Auctions: Here, potential suppl iers submit their bids without knowledge of other bids made and the best bid is selected. Step 6: Selecting the Final Price – After the pricing methods have narro wed the range of the price, the company selects the final price by taking into a ccount factors as listed below: • • Impact of other marketing activities: The final price must take into account the brand’s quality and advertising relative to the c ompetition. Company Pricing Policies: The final price must be compliant with the company’s pricing policies.

responding to price changes: • Initiating price cuts: Companies sometimes initiate price cuts in order to domin ate the market through lower prices. • Initiating price increases: Companies initiate price increase to increase their profits by taking into account the feasibility of the price rise. A major factor leading to these price increases is over demand, where the company cannot supply all its custome rs and hence raises its prices. • Responding to competitors’ price changes: Firms respond • Gain-and-Risk-sharing Pricing: Buyers may resist acceptin g a supplier’s proposal because of a high perceived level of risk. Hence, the sell er has the option of offering to absorb part to price cuts/raises by competitors by considering various factors like the product’s stage in the life cycle, its im portance in the company portfolio, etc. • • • • • or all of the risk if the promised value is not delivered. Impact of price on ot her parties: The final price’s effect on other parties such as distributors, deale rs, competitors, government should also be taken into account by the management. Adapting the Price Geographical Pricing Price Discounts and Allowances Promotional Pricing Differen tiated Pricing